Some More Info on the Mortgage Loan Originator Definition

Facts: 1. Borrower paid compensation cannot exceed lender paid compensation.

  1. Seller finances are exempt from the definition of a loan originator if: (a) the seller finances three or fewer properties in any 12-month period each of which is owned by the seller and serves as security for the financing.
  2. The seller has not constructed or acted as a contractor for the construction of the property in the ordinary course of business.
  3. The financing is fully amortized.
  4. The seller determines in good faith that the consumer has a reasonable ability to repay.
  5. Financing has a fixed rate or an adjustable rate adjustable after five years or more subject to reasonable or annual and lifetime limitations on interest rate increases.
  6. A real estate broker or salesperson is a mortgage loan originator if compensated by a creditor or loan originator or by any agent of the above for a particular consumer credit transaction and is subject to Section 36 of the Truth in Lending Act. (12cfr1026.36(a1).

Moral: Do not fully amortize the loan and you are an MLO without a license. What does that mean? May be getting sued? May be having CFPB chase you? Who knows? Especially since it may be a one-time activity. But how well do you like to sleep at night? Remember, this is not all. It is just a partial to remind you of some of the factors you may run across in the course of a loan.

Remember, if the loan is a home equity line of credit, Section 36 does not apply, except for prohibiting the use of mandatory arbitration where the loan is secured by the consumer's principal residence. Also, no requirement can be made for single premium credit insurance and other kinds of insurance like credit life, disability, etc. (12cfr1026.36(h)(i))

California Man Gets 21 Months in Federal Prison for Bank Fraud

Facts: On March 13, Saleem M. Khan was sentenced to 21 months in prison and ordered to pay a $60,000 fine for bank fraud and making false statements to a financial institution.

Khan had pleaded guilty to submitting false documents to a financial institution in order to obtain a settlement of his home equity line of credit. Khan admitted that he took out a $344,000 HELOC on his home in approximately September 2005. That HELOC was owned by E-Trade Bank, which retained PNC Bank to service the loan. By 2010, Khan had stopped making payments on the HELOC.

In January 2011, he provided a so-called "hardship package" to PNC Bank to demonstrate his inability to pay the loan. That hardship package contained false statements regarding Khan’s employment history, income, and assets and included a forged pay stub that underreported his monthly income by approximately $2,000.

Khan failed to disclose to PNC Bank the significant stock options trading gains of approximately $800,000 that that he had made in the previous year. Based on Khan's misrepresentations, PNC Bank and E-Trade Bank ultimately agreed to settle the outstanding $344,000 HELOC balance for only $45,000, and the banks took action to re-convey to Khan the lien that they held on Khan's property.

Judge Yvonne Gonzalez Rogers also sentenced the defendant to a three-year period of supervised release in addition to the jail time and fine. She also set a hearing for May 29, for determination of a restitution amount to be paid to the bank victim in this case. (usatty31414ndca)

Moral: The only question in my mind, is given this was a one man operation and the bank was defrauded, how did the government find out after the fact? Did Khan brag about it?

Michigan Man Guilty of Mortgage Fraud Could Get 30 Years in Federal Prison

Facts: On March 20, Albert Greer Sr. was found guilty of conspiracy to commit bank fraud and of aiding and abetting bank fraud.

The jury deliberated for three hours before returning the guilty verdicts, concluding a trial that began on March 11 before United States District Judge Stephen J. Murphy, III. 

From 2004 through 2007, Greer devised and executed a scheme to commit bank fraud by locating residential properties in the Detroit metropolitan area, then recruiting and paying straw buyers to sign for mortgages. Greer often made the mortgage payments on the loans for several months so the lenders would not immediately realize that the loans had been obtained by fraud, but then the loans went into default and the properties went into foreclosure.

Co-defendant and co-conspirator Carlton Davis (who pleaded guilty in 2013 to conspiring with Greer) would submit fraudulent loan applications to various financial institutions on behalf of the straw buyers. The applications were filled with material false representations that were supported by phony documents Greer created, including W-2s, earnings statements, verifications of deposit, verifications of employment, and so on. Greer attempted to insulate himself from criminal liability by acting through the straw buyers and through shell companies, including Detroit National Mortgage Associates, which he established in the names of his family members. Greer also had his family members open bank accounts in their names, which he used to launder the proceeds of his crimes.

Greer not only scammed banks out of several million dollars, he also stole the sellers' proceeds on occasion by submitting invoices for "consulting fees" owed to Detroit National Mortgage Associates; if the seller did not realize those fees were included on the HUD-1s, proceeds checks would be issued to the shell company at closing, and Greer would cash the checks. In this way, Greer stole $167,844.31 from a Detroit homeowner in 2005 and $21,948.92 from a homeowner in 2006.

Each count of conspiracy to commit bank fraud and aiding and abetting bank fraud carries a maximum prison term of 30 years, a $1 million fine, and five years of supervised release following the period of incarceration. No sentencing date has been set at this time. (usattyedmi32114)

Moral: Notice how the federal agents prosecuted this person for loans that closed over 10 years ago! 

Texas Man Sentenced to Almost Five Years in Federal Prison for Foreclosure Rescue Scam

Facts: On March 21, Jarrod Williams was sentenced to 57 months in federal prison in connection with a combination foreclosure rescue and drug distribution scheme in the Eastern District of Texas. Williams was also ordered to pay over $1.4 million in restitution.

From February 2007 to June 2012, Jarod Williams, Julius Williams and Charles William controlled and operated Applied Investment Strategies Inc., which marketed itself as a foreclosure rescue service offering assistance to homeowners at risk of foreclosure. Once a homeowner retained AIS, the defendants fraudulently used the customer's personal identification information to prepare and send false military orders to banks and lending institutions in order to claim relief from foreclosure under the Servicemember's Civil Relief Act. AIS would then lease out the home and collect rental payments for AIS’ benefit. The scheme involved approximately 38 homes throughout North Texas and also extended to interfering in the repossession of automobiles. After at least one of the fraudulently acquired properties was vacated Charles Williams, Christopher Carter and Sean Harrell turned it into a marijuana grow operation that housed approximately 1,300 marijuana plants that were intended for distribution. A federal grand jury returned an indictment on July 11, 2012, charging the defendants with federal violations.

Charles Williams, Christopher Carter and Sean Harrell are each currently serving prison sentences ranging from 41 to 50 months. Julius Williams faces up to five years in federal prison at sentencing.  (usattyedtx32114)

Moral: If nothing else they were entrepreneurs. However, now they have up to five years to think of a new vocation.

The information contained herein is not legal advice. An attorney should be consulted if you desire legal advice.